I’ve just hit the eject button on two of my more speculative positions: e.l.f. Beauty (NASDAQ: ELF) and SentinelOne (NYSE: S).
While the crowd cheered for e.l.f.’s latest moves — a $1 price increase globally across all its products and the Rhode acquisition — I wasn’t buying into the hype.
Let me tell you why.
The acquisition itself comes at a hefty price: US$1 billion in total. This will further burden e.l.f.’s balance sheet, as it already carries a net debt of US$164 million.
No doubt Rhode is going to boost its sales and earnings, but I am unsure if it is the correct move, especially during the current uncertain times.
Hence, selling it was a straightforward decision for me, especially when I am getting a 55% profit in less than three months.
I will continue to monitor e.l.f.’s development and see how things unfold. I do not rule out reinvesting in it again when there’s greater clarity.
In the mean time, the portfolio will depend on Ulta Beauty (NASDAQ: ULTA) to deliver any upside from the beauty industry.
Under the new CEO Kecia Steelman, the company is off to a good start, with a better than expected performance for 1Q 2025, with comparable store sales up by 2.9%.
While it’s still early days, I sense a renewed vigour from the company as I browsed through the earnings transcript. Hopefully, that would translate to an improved performance over time.
Now, let me briefly talk about my sale of SentinelOne.
The cybersecurity company reported a respectable year-on-year (YOY) revenue growth of 23%. However, against the backdrop of 30-50% growth it achieved in previous years, it’s an indication that the company cannot sustain its high growth rate.
While an above 20% growth rate is nothing to scoff at, it is disappointing as the much larger cybersecurity firms, such as CrowdStrike (NASDAQ: CRWD) and Zscaler (NASDAQ: ZS), are still growing at a similar or higher rate.
Hence, it does look like my decision eight months ago to switch from Crowdstrike to SentinelOne was a mistake. Nope, I am not switching back, but given my low interest and conviction after following SentinelOne for a year, the divestment makes sense to me.
Of course, this could yet turn out to be another mistake when I look back in the future, but there’s no way I know now.
So, just like Ulta Beauty’s role in the portfolio, Zscaler will now shoulder the responsibility to deliver the upside from the cybersecurity industry.
And I am glad to say that Zscaler is doing tremendously well this year, returning a 43% gain year-to-date, even after accounting for the 6% forex drop in USD against SGD.
The robust return is undergirded by the positive momentum of its underlying business. In the recent 3Q 2025 earnings, the company exceeded all its estimations and up the guidance for the year.
The introduction of the Z-Flex program, a new purchasing mechanism, during the quarter, and the acquisition of Red Canary by the end of August, signal the continuation of its growth momentum going forward.
These recent divestments from e.l.f. Beauty and SentinelOne aren’t just about individual stock performance; they underscore a core principle of my investing approach: starting small, learning, and continually reviewing my positions based on evolving conviction, even when it means diverging from market sentiment.
Through this iterative process, I aim to build a portfolio of companies in which I hold higher conviction, ultimately benefitting from their long-term growth.
Discover more from The Fat Investor
Subscribe to get the latest posts sent to your email.